New Product Standard to Save Equity Release Customers Millions

The Equity Release Council has made partial loan repayments without penalty a prerequisite for all equity release plans for new customers starting today (March 28).

The decision is expected to save equity customers nearly £100 million in interest charges over the next 20 years.

The move will help clients lessen the effects of compound interest, lower their borrowing costs later in life, and increase their chances of leaving a traditional legacy.

In 2021, lifetime mortgage customers made partial repayments without penalty of £78 million, with more than 125,000 partial repayments without penalty made during the year, an average of £608 for each repayment .

In total, these customers would realize a combined saving of £39 million in interest costs over a decade, or the equivalent of £99 million over 20 years.

The standard adds to the existing four standards in place, which include the right for capital release customers to stay in their home for life and a fixed or capped interest rate.

The other two standards are a non-negative equity guarantee, which prevents customers from owing more than the value of their home or leaving a debt to their families or beneficiaries, and the right to transfer their loan to another acceptable property.

According to the Equity Release Council, nearly 700 companies have registered to practice under these standards.

The protection they offer is increasingly seen as important by customers; research from Mintel’s annual Equity Release Schemes survey found that “strong consumer protection” was the most important feature of equity release products for potential customers.

Equity Release Council chief executive Jim Boyd said: ‘The right to stay in your home for life, with no obligation to make ongoing repayments and no threat of repossession, is at the heart of the appeal. of equity release since 1991 and remains a central pillar of the modern market.

“Our new product standard adds to this by ensuring that people have the freedom to reduce their borrowings if circumstances change. This allows Capital Release clients to mitigate the effects of compound interest and lower their borrowing costs later in life, which we know is often one of their top concerns.

He adds: “The evolution of the market means that many customers are already saving tens of millions of pounds in interest costs by making partial repayments without penalty as they can afford it.

“By introducing the new product standard, we expect many more customers to benefit, as all new products will have this protection built in.”

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